BlackBerry Ltd May Soon Bid Adieu To Its Hardware Business

BlackBerry did not unveil any low-cost Android handset at the Mobile World Congress a few weeks ago, which could suggest it is inching closer to exiting the hardware business. Though there could be many reasons for not unnveiling such a device, TD Securities analyst Daniel Chan believes that the lack of a product introduction at the event could suggest a strategy change is on the way.

Hardware business may soon be gone

There were already visible signs of numbered days for BlackBerry’s operating systems. In late February, WhatsApp decided to end support to all BlackBerry devices by 2016, and the Canadian firm itself told users that the Facebook app will not work on BB10 after March 31.

“Not only are there no BB10 devices in the pipeline, but also the loss of two of the most popular mobile apps across all platforms could lead to the end of life of BB10,” Chan said.

Chan noted that by closing down the hardware segment, the Canadian firm would become a $1.4 billion per year enterprise software company with estimated net cash of 1.4 billion and 33% operating margin. That is a “much better overall picture than today,” Chan noted.

Exiting the hardware segment could result in big savings for the Canadian firm as research and development related to the business is expected to be around 30% to 50% of the total R&D spending. More about it may be known when the company posts its fourth-quarter results on April 1.

BlackBerry Q4: what to expect?

For the fourth quarter, the Canadian firm is expected to report a net loss of 6 cents per share (based on 101 Estimize respondents) compared to a profit of 4 cents per share in the same quarter last year. The consensus estimate is for a loss of 9 cents per share.

Similar to Wall Street, Estimize underestimated BlackBerry’s revenue last quarter, but this time, Estimize is expecting revenue of $566 million, which is more than what analysts are expecting. This would be a drop of about 14% year over year. For the full year, Wall Street expects revenue to drop 31%.

At 12:03 p.m. Eastern today, BlackBerry shares were down 0.46% at $7.55. Year to date, the stock is down by over 19%, while in the last year, it is down by over 20%.